Investment banks saw the amount they earn in fees rise to record levels for the fifth year in a row in 2007, despite the impact of the credit crunch on major banks.

In 2007 fees increased 21 per cent to $84.3 billion (£42.8 billion), around half of which was from advising on mergers and acquisitions. The rest was from equity and fixed income underwriting.

International Financial Services London (IFSL), who released the information, said that the US was the main source of the increase, and Europe accounted for a third of spending on bank's fees.

Marko Maslakovic, senior economist at IFSL, said in a statement, While Northern Rock difficulties have cast a long shadow in recent months, UK banks' broader economic contribution is reflected in net exports expected to reach a record pounds 14bn in 2007, up on pounds 12.1bn in the previous year.

Despite the rise in 2007, 2008 is expected to be a year of decline as the economy slows down. The year has already begun badly for banks with many declaring more losses resulting from the credit crunch.

The IFSL said that so far banks had reported losses of $130 billion resulting from the sub-prime mortgage crisis and said that further losses were to be expected in 2008.